The Panama Papers scandal can be taken as further evidence of the declining relevance of the nation state, at least for the rich. Money cannot be held within national borders. Individuals and corporations will shelter their income through tax inversion, offshore shell companies, and any other means possible. This is what happens with functional differentiation, and the top 1% have the means to take advantage of these options. As long as these moves are legal or sort of legal, appeals to patriotism will be unpersuasive.
The global economy is an autopoietic function system, and it cannot be controlled by governments. It will adapt to any legislation designed to prevent tax inversion or tax sheltering. The effort to stop this trend is kind of like the “war on drugs” or a war on cockroaches. These wars cannot be won because the opponents are too adaptable.
Print technology, the first mass media, facilitated the formation of nations, and the Internet is now undermining nationalism. As Luhmann writes,
Printing and school instruction on the basis of printed texts required language to be standardized. Since the sixteenth century, national languages had been developing, which were soon to become tools of political nationalization and increasingly replaced Latin as the language of knowledge transfer (Theory of Society, vol 1, 176)
Society is now a world society, or a world communication network, and it makes no sense to speak of “American society” or “German society”or “Chinese society.” Society doesn’t consist of people or shared languages or shared histories; it’s just communication in its various media, such as oral and written language, money, power, style, truth, and norms (See Roth and Schutz, 2015). Print and near-universal literacy made nations possible. Radio, television, film, the telephone, communication satellites, and the airplane then did a lot to dissolve national borders, and the Internet may be finishing the job–at least of the rich.
But when it comes to the poor, national borders may be strengthened to exclude immigrants and refugees. So it’s an odd situation. Nationalism, protectionism, and xenophobia on one side and the dissolving of national borders on the other side. There is a free flow of information and money but not of people.